Labour attacks Osborne over "£2bn tax cut" for the banks

The party releases new figures showing that the banks have paid £1.9bn less in tax than David Cameron promised after cuts to corporation tax.

Parliament officially returns from its Easter recess today and Labour's number crunchers are already causing mischief for George Osborne. The party has accused the Chancellor of handing banks a £2bn tax cut after releasing new figures showing that the coalition's bank levy has raised significantly less than expected in the last two years. 

David Cameron pledged that the levy would raise £2.5bn a year and offset the gains to banks from the cuts in corporation tax. But figures from the OBR show that the levy raised just £1.6bn in 2012-13, while banks received a corporation tax cut of £200m, leaving the Treasury with a net gain of £1.4bn - £1.1bn less than promised. The previous year (2011-12), the levy raised £1.8bn, while the banks gained £100m from the corporation tax cut, a net gain of £1.7bn, or £800m less than promised. In total, then, the banks have paid £3.1bn in tax, £1.9bn less than pledged by Cameron (see table below).

 

2010-11

2011-12

2012-13

Labour bank bonus tax (£bn)

3.5

n/a

n/a

Tory-led Government bank levy (£bn)

n/a

1.8

1.6

Corporation Tax rate (%)

28

26

24

Corporation tax cut for banks from 2010-11 level (£bn)

n/a

0.1

0.2

Net amount raised from banks (£bn)

3.5

1.7

1.4

Amount raised compared to £2.5bn promised by govt (£bn)

n/a

-0.8

-1.1

Chris Leslie, the shadow financial secretary to the Treasury, plans to raise the figures when the Commons debates the second reading of the Finance Bill later today. He said: 

On top of last week’s tax cut for millionaires, this is effectively a tax cut of nearly £2 billion for the banks at a time when millions of working people are being forced to pay the price for this government’s economic failure.

Whether it’s on tax or watering down reforms to separate retail and investment banks, David Cameron and George Osborne have repeatedly failed to stand up to the vested interests of the banks.  

Labour is still urging the coalition to repeat Alistair Darling's bank bonus tax, which raised £3.5bn in 2010-11, in order to fund a jobs guarantee for every young person unemployed for more than a year (a measure the party is particularly keen to highlight as the benefit cap and other welfare reforms take effect). 

The Treasury has responded by stating that the "fragility of global financial markets" means it is unsurprising that the levy has raised less than by expected and by promising to review it this year "to ensure it is operating efficiently". 

As for the bank bonus tax, we can expect Osborne to point out that Darling himself described it as a "one-off" on the grounds that "the very people you are after here are very good at getting out of these things and will find all sorts of imaginative ways of avoiding it in the future". To most voters, however, that will sound like an argument for tackling avoidance, not for cutting taxes. And the banks' toxic reputation, combined with the image of a government devoted to the rich, means this remains fertile political territory for Labour. 

In the last two years, the banks have paid £3.1bn in tax, £1.9bn less than the government promised. Photograph: Getty Images.

George Eaton is political editor of the New Statesman.

Picture: ANDRÉ CARRILHO
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Leader: Boris Johnson, a liar and a charlatan

The Foreign Secretary demeans a great office of state with his carelessness and posturing. 

Boris Johnson is a liar, a charlatan and a narcissist. In 1988, when he was a reporter at the Times, he fabricated a quotation from his godfather, an eminent historian, which duly appeared in a news story on the front page. He was sacked. (We might pause here to acknowledge the advantage to a young journalist of having a godfather whose opinions were deemed worthy of appearing in a national newspaper.) Three decades later, his character has not improved.

On 17 September, Mr Johnson wrote a lengthy, hyperbolic article for the Daily Telegraph laying out his “vision” for Brexit – in terms calculated to provoke and undermine the Prime Minister (who was scheduled to give a speech on Brexit in Florence, Italy, as we went to press). Extracts of his “article”, which reads more like a speech, appeared while a terror suspect was on the loose and the country’s threat level was at “critical”, leading the Scottish Conservative leader, Ruth Davidson, to remark: “On the day of a terror attack where Britons were maimed, just hours after the threat level is raised, our only thoughts should be on service.”

Three other facets of this story are noteworthy. First, the article was published alongside other pieces echoing and praising its conclusions, indicating that the Telegraph is now operating as a subsidiary of the Johnson for PM campaign. Second, Theresa May did not respond by immediately sacking her disloyal Foreign Secretary – a measure of how much the botched election campaign has weakened her authority. Finally, it is remarkable that Mr Johnson’s article repeated the most egregious – and most effective – lie of the EU referendum campaign. “Once we have settled our accounts, we will take back control of roughly £350m per week,” the Foreign Secretary claimed. “It would be a fine thing, as many of us have pointed out, if a lot of that money went on the NHS.”

This was the promise of Brexit laid out by the official Vote Leave team: we send £350m to Brussels, and after leaving the EU, that money can be spent on public services. Yet the £350m figure includes the rebate secured by Margaret Thatcher – so just under a third of the sum never leaves the country. Also, any plausible deal will involve paying significant amounts to the EU budget in return for continued participation in science and security agreements. To continue to invoke this figure is shameless. That is not a partisan sentiment: the head of the UK Statistics Authority, Sir David Norgrove, denounced Mr Johnson’s “clear misuse of official statistics”.

In the days that followed, the chief strategist of Vote Leave, Dominic Cummings – who, as Simon Heffer writes in this week's New Statesman, is widely suspected of involvement in Mr Johnson’s article – added his voice. Brexit was a “shambles” so far, he claimed, because of the ineptitude of the civil service and the government’s decision to invoke Article 50 before outlining its own detailed demands.

There is a fine Yiddish word to describe this – chutzpah. Mr Johnson, like all the other senior members of Vote Leave in parliament, voted to trigger Article 50 in March. If he and his allies had concerns about this process, the time to speak up was then.

It has been clear for some time that Mr Johnson has no ideological attachment to Brexit. (During the referendum campaign, he wrote articles arguing both the Leave and Remain case, before deciding which one to publish – in the Telegraph, naturally.) However, every day brings fresh evidence that he and his allies are not interested in the tough, detailed negotiations required for such an epic undertaking. They will brush aside any concerns about our readiness for such a huge challenge by insisting that Brexit would be a success if only they were in charge of it.

This is unlikely. Constant reports emerge of how lightly Mr Johnson treats his current role. At a summit aiming to tackle the grotesque humanitarian crisis in Yemen, he is said to have astounded diplomats by joking: “With friends like these, who needs Yemenis?” The Foreign Secretary demeans a great office of state with his carelessness and posturing. By extension, he demeans our politics. 

This article first appeared in the 21 September 2017 issue of the New Statesman, The revenge of the left